Modeling Urbanization and Economic Growth

Abstract

The past quarter century has witnessed unprecedented economic progress in the Third World. Yet major problems have arisen, some of which are the consequences of the progress itself and may become serious constraints on future development. City growth is one such problem. Pessimists stress the developing countries' inability to cope with the resource and social systems requirements of rapid urban growth, thus prompting the term "over-urbanization". Optimists minimize the negative externalities and view urban growth as the key to raising average labor productivity and living standards. All of this experience has taken place under conditions of "population explosions".

This paper presents a general equilibrium economic-demographic model which highlights various aspects of urbanization. Attention is focused on the determinants and consequences of rural-urban migration, on the resource demands of housing associated with rapid urbanization, on optimal land use between urban and rural activities, and on the allocation of investments to education and labor force training.

The economic model is designed to be "representative" of a large group of developing countries, and it will eventually contain a fully elaborated demographic component. The model will be tested with Third World growth experience since the 1950s. It will then be used to analyze the sources of migration and urbanization, and to explore their interaction with distribution, accumulation and growth.